State of the MarketsInside Views on the Health and Productivity of the Global Innovation Economy

svb.com/state-of-the-markets-report 2

State of the Markets: Fourth Quarter 2019

Bob BleeHead of Corporate Finance Silicon Valley Bank

As we enter the final stretch of 2019, the global economic outlook is cloudy. Multiple uncertainties, including the intensifying trade war and conflicting economic indicators, have put investors and policymakers on edge. Trying to get ahead of a broader slowdown, central banks are cutting interest rates.

Private markets remain buoyant. After a banner fundraising year in 2018, VC dry powder is close to historic highs and PE fundraising is now having its own record year. A diverse cast of investors, from VCs to large asset managers, is participating in massive late-stage rounds, contributing to net new Unicorn creation.

The United States has dominated exits this year, with total US Unicorn exit value this year now standing at around $215 billion. Unicorns that have gone public have generally performed well, with a couple of high-profile exceptions. This year, public markets appear to reward unit economics more than growth-at-all-costs. In addition, disruptive new routes to liquidity have entered the conversation, such as direct listings and secondary programs.

Despite jitters created by the WeWork saga, fear of a global economic slowdown, and rising political uncertainty, the venture ecosystem remains robust — with ample private capital stockpiled for years to come.

Wheels of Venture Keep Turning Despite Uncertainty

svb.com/state-of-the-markets-report 3

State of the Markets: Fourth Quarter 2019

Macro

A Window of Uncertainty

Private MarketsOnward and Upward

Public MarketsAn Update on IPOs

Liquidity OptionsAlternative Routes

4 11 21 28

4svb.com/state-of-the-markets-report

Macro A Window of Uncertainty

svb.com/state-of-the-markets-report 5

Consumers Still Happy; Producers Start to Hurt

Notes: Wage growth figures include seasonal adjustment. Index readings below red line indicate a contraction. Europe PMI index is for European Union; other Europe indicators are for the Euro Zone.Source: Bureau of Labor Statistics, OECD, Eurostat, Markit Economics, ISM, University of Michigan and SVB analysis.

Wage growth indicates the labor market remains strong, and consumer confidence is holding steady. In contrast, manufacturing activity and business confidence are on the decline, a product of the continuing trade war and late-cycle anxiety.

Labor Markets and Consumer Confidence

Production and Business Confidence

2.7%

Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

2017 2018 2019

859095

100105110

Jan

Jun

Nov

Apr

Sep

Feb Jul

2017 2018 2019

2.9%

Q3 Q1 Q3 Q1 Q3

2017 2018 2019

Average since 2010

Consumer Confidence

98

99

100

101

102

Jan

Apr

Jul

Oct

Jan

Apr

Jul

2018 2019

98

99

100

101

Jan

Jun

Nov

Apr

Sep

Feb Jul

2017 2018 2019

4550556065

Jan

Apr

Jul

Oct

Jan

Apr

Jul

2018 2019

*(Real Production)

98

99

100

101

102

Jan

Apr

Jul

Oct

Jan

Apr

Jul

2018 2019

444648505254

Oct

Nov

Jan

Feb

Apr

May Ju

lAu

g

2018 2019

*(PMI)

Production* Business Confidence

Average since 2010

Wage Growth

svb.com/state-of-the-markets-report 6

A Declining Rate Environment

Notes: 1) One-Year Prime Lending Rate, 2) Fed Funds Rate, 3) Bank of England Official Bank Rate, 4) ECB Deposit Rate.Source: S&P Capital IQ, Bloomberg, Federal Reserve Bank of New York, PBOC, Bank of England and SVB analysis.

For the first time since 2008, the US Federal Reserve cut rates amid recession concerns, slowing economic indicators and political uncertainty. Other major economies have followed suit, with the Eurozone entering negative territory and China effectively making cuts through re-benchmarking.

Benchmark Rates for Major Economies: 2009–2019

China1 US2

EU4UK3

Yield Curve Inversion as an Indicator

-1%

0%

1%

2%

3%

4%

5%

6%

7%

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

10Y - 2Y Inversion Month

Months Before Recession

Aug 1978 16

Sep 1980 10

Dec 1988 19

Feb 2000 13

Dec 2005 23

Aug 2019 ?

Median 16

svb.com/state-of-the-markets-report 7

Tech Tapping Convertible Debt

Source: SVB Leerink and SVB analysis.

With a drop in benchmark rates, stable credit spreads and strong performance of the convertible asset class, convertible debt issuance has been robust year-to-date. Tech has continued to take a larger share of total issuance and is on pace to surpass 2018’s record year.

Convertible Debt Issuance

Tech Convertible Debt Issuance by Sub-Sector

$22B

$48B $5

0B

$40

B

$27B $3

7B

$49B

$46B

$3B

$16B

$14B

$6B

$5B

$13B

$25B

$24B

11%

34%

29%

15%18%

35%

50%51%

2012 2013 2014 2015 2016 2017 2018 2019

Total Convertible Debt Issuance

Tech Convertible Debt Issuance

Tech % of Convertible Debt Issuance

37%

16%11%

10%

10%

6%

1%10%

Software

Semiconductor

E-Commerce

Internet Media

Measurement Instruments

Computer Hardware & Storage

Internet-Based Services

Other

$62B

svb.com/state-of-the-markets-report 8

More Corporate Debt in the System

Notes: 1) GFC = Global Financial Crisis.Source: Bank for International Settlements, Bureau of Economic Analysis and SVB analysis.

Fomented by a low interest rate environment and economic expansion, corporate debt levels have risen to new heights after remaining relatively steady throughout the last cycle. Since 2011, debt to profitability has reached a post-GFC1 high.

Corporate Debt and Profit, 2001–2018

US Corporate Profits

Value of Outstanding US Corporate Debt Securities

Profits as a Percentage of Debt Securities

26%

53%

28%

45%

33%

$0T

$1T

$2T

$3T

$4T

$5T

$6T

$7T

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

svb.com/state-of-the-markets-report 9

Trade With China Matters to Tech

Notes: 1) Product codes associated with the High-Tech Sector are defined by the US Census. 2) Advanced Tech Products as defined by the US Census. 3) Year-to-date data through August 2019.Source: US Treasury, US Census and SVB analysis.

The trade war with China continues to linger as Trump and Xi struggle to find common ground. Since our last update, Trump has levied new tariffs and threatened more increases. Despite this, the US remains heavily reliant on China —and broader Asia — for advanced tech imports.

Effect of US Tariff Rounds on High-Tech Sector1

Advanced Tech Imports2 YTD3

$84B

$35B

$16B

$15B

$14B

$13B

$11B

$11B

$10B

$7B

Est. Additional Tariff Burden (in Effect)

Additional Tariff Burden as a Percentage of US High-Tech Imports from China

$9B

$15B

0.5%0.8%

6.0%

10.1%

Round 1 July 2018

Round 2 Aug. 2018

Round 3Sep. 2018

Round 4Sep. 2019

svb.com/state-of-the-markets-report 10Source: US Census, United States Federal Reserve and SVB analysis.

The trade war has grown in size, intensity, and scope. Tech has joined agriculture and manufacturing in the crosshairs of tariffs and other sanctions. The yuan’s recent weakening has brought currency to the fore, which may cushion the effects of the tariff increases.

0x

1x

2x

3x

4x

5x

6x

7x

¥5.8

¥6.0

¥6.2

¥6.4

¥6.6

¥6.8

¥7.0

¥7.2

Janu

ary

Febr

uary

Mar

chAp

rilM

ayJu

ne July

Augu

stSe

ptem

ber

Octo

ber

Nove

mbe

rDe

cem

ber

Janu

ary

Febr

uary

Mar

chAp

rilM

ayJu

ne July

Augu

stSe

ptem

ber

Octo

ber

Nove

mbe

rDe

cem

ber

Janu

ary

Febr

uary

Mar

chAp

rilM

ayJu

ne July

Augu

stSe

ptem

ber

2017 2018 2019

Yuan strengthens vs. dollar by ~6.5% through 2017

Yuan begins to weaken as tariffs ramp up

Yuan crosses the 7 mark; US declares China a “Currency

Manipulator”

US trade rhetoric ramp-up and

beginning of USTR investigation

Tariff rounds 1 & 2 take effect

China exports jump on yuan

depreciation and additional tariffs

Tariff round 3 takes effect, with a

greater emphasis on Tech

Huawei ban surfaces and

Chinese exports fall

China Exports to Imports Ratio with US Yuan per Dollar

Trade War Begets Tech War Begets FX War

11svb.com/state-of-the-markets-report

Private Markets Onward and Upward

svb.com/state-of-the-markets-report 12

An Update on the Mega-Funds

Notes: 1) 2019 actual number as of 9/30/2019.Source: PitchBook and SVB analysis.

Billion-dollar-plus Venture Capital funds (“Mega-Funds”) continue to grow in size and number. More than half of the known dry powder in these funds was raised in the last two years. In theory, these huge pools of capital will continue to drive later-stage investment through a possible downturn.

Mega-Fund Dry Powder by Fund Close Date

Size of the Mega-Fund Club & Total Mega-Funds1

$37B

49.5%50.5%

Mega-Funds Raised Since 2018

Mega-Funds Raised Before 2018

4

1113 14

16

1820

2224

2731

33

4

1114

151617 18

2427

2830

32 38

41 42

4851

58 61

70

74

1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019

Cumulative Mega-Funds Raised

Cumulative Firms That Raised At Least One Mega-Fund

Mega-Fund Dry Powder by Vintage

$1.7B $2.4B$4.6B $5.7B

$28.6B

2014 2015 2016 2017 2018

svb.com/state-of-the-markets-report 13

The Reckoning Is Happening at the Early Stage

Notes: 1) 2019 actual number as of 9/30/2019.Source: PitchBook and SVB analysis.

Since 2015, the concentration of investment has become more pronounced at the early stage, while the seed stage has shown the opposite trend. This suggests investors are spreading capital around before doubling down on their most promising investments.

Proportion of Companies that Represent 80% of Total Investment by Stage1

45%

47%48% 49% 49%

40%39%

38% 38%

36%

32%32%

34%

31% 31%

2015 2016 2017 2018 2019

Seed Early Stage Late Stage

Conc

entr

atio

n

Average Deal Size for the 49%:

$4.5M

Average Deal Size for the 36%:

$25.5M

Average Deal Size for the 31%:

$87.8M

svb.com/state-of-the-markets-report 14

While this year has been defined by monumental exits, the massive Unicorn creation this year is not to be ignored. More than 50 Unicorns have been minted in 2019, bolstering the backlog of companies that will be looking for an exit in the years to come.

Unicorns Are Being Minted at a Historic Rate

New Unicorns Created:20191

Company Raised to Date Valuation

$897.4M $6.2B

$1.4B $3.2B

$1.0B $2.7B

$696.1M $2.6B

$205.9M $2.5B

$202.0M $2.3B

$309.1M $2.2B

$479.8M $2.1B

$777.0M $2.0B

$557.5M $1.9B

Net Unicorn Creation: Entrants vs. Exits

2.4x

3.0x3.3x 3.2x

1.8x

5.1x

2.4x

4.8x

H1'16 H2'16 H1'17 H2'17 H1'18 H2'18 H1'19 H2'19

Notes: 1) Data as of 9/30/2019.Source: PitchBook and SVB analysis.

$116

B

$61B

$70

B

$220

B

$332

B

$391

B

$444

B

$60

3B

$60

6B

2011 2013 2015 2017 2019

svb.com/state-of-the-markets-report 15Notes: 1) Data as of 9/30/2019.Source: PitchBook and SVB analysis.

Unicorn value is being harvested massively this year, with the backlog being replenished through new Unicorn creation. The total valuation of Unicorns as of Q3 has returned to 2018’s record level, despite the likes of Uber and Lyft going public.

Unicorn Backlog Reaches New Heights

Aggregate Unicorn Post-Money Valuation Unicorn Backlog1

180Companies

$385B Aggregate Value

1

svb.com/state-of-the-markets-report 16

Significant Capital Fuels PIPOs

Notes: 1) Private IPOs, or PIPOs, are $100M+ private venture rounds. Source: PitchBook and SVB analysis.

Deal Count of US Venture-Backed Tech IPOs vs. PIPOs: 2013–Q3’19

Traditionally, companies seeking sizable capital infusions would have to accept the heightened scrutiny and transparency of the public markets. Starting in 2014, the rate and level of funding for PIPOs1 exploded. Since Q2 2018, a new normal has been reached for the rate of PIPOs.

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

2013 2014 2015 2016 2017 2018 2019

0

5

10

15

20

25

30

35

40

45

50

35%

44%

PIPO Booms

US Tech PIPOs US Tech IPOs Repeat PIPO Co. PIPO <1Y Later

New Normal

svb.com/state-of-the-markets-report 17

Non-TraditionalsHelp Drive PIPO Investment

Notes: 1) Crossovers include BlackRock, Coatue Management, Fidelity Investments, Franklin Templeton Investments, T. Rowe Price, The Hartford Financial Services Group, Tiger Global Management and Wellington Management. 2) 2019 actual number as of 9/30/2019.Source: PitchBook and SVB analysis.

Participants in US Tech PIPOs: 2014–YTD 20192

If not directly, then indirectly SoftBank has been the catalyst for rising PIPOs. Recently, PIPOs have been largely supported by non-traditional venture investors such as private equity (PE) firms and large asset managers (crossover investors). Crossover participation has rebounded after a pullback in 2016.

54 69 48 61 117

115

26%

42%

29%

43% 42%

48%

46%

58%54%

46%42%

48%

43%

33%

17%13%

26%28%

2%11%

9% 10%

2014 2015 2016 2017 2018 2019

PIPO Deal Count

PE Firms $1B+ VC Funds Crossover Investors1

SoftBank Vision Fund

svb.com/state-of-the-markets-report 18

Traditional Asset Managers Venture Back

Notes: 1) Crossovers include BlackRock, Coatue Management, Fidelity Investments, Franklin Templeton Investments, T. Rowe Price, The Hartford Financial Services Group, Tiger Global Management and Wellington Management. Source: PitchBook and SVB analysis.

Crossover investors like BlackRock and Fidelity have been investing more in venture-backed companies. Due to the abundance of private capital, companies are taking longer to go public — extending the holding period of these investments.

Median Days Between First VC Investment by Crossover1 and IPO

VC Rounds with Crossovers Participating

40 23 15 32 28 25

286

413493

1,130

1,613

1,799

2014 2015 2016 2017 2018 2019

$5B $2

B

$2B

$15B

$23B

$20

B

$8B

$40

B

$16B

12

41 45

43

119

150

5566

130133

2010 2012 2014 2016 2018

VC-Backed Tech IPOs

Days

Total Invested in VC Rounds with Crossovers

Deals

Projected Deals172

$21B

svb.com/state-of-the-markets-report 19Notes: 1) 2019 actual number as of 9/30/2019.Source: PitchBook and SVB analysis.

PE vs. VC Fundraising: Q1’18–Q3’19

Private Equity (PE) continues to raise record levels of funds, with 2019 turning into a banner year. Additionally, PE buyouts of US VC-backed Tech companies have increased significantly, relative to initial public offerings over the past five years.

Private Equity Rises to the Occasion

PE vs. IPO as a % of Total Exits1

19%

20%

19%

25%27%

31%

5%2% 2%

4% 3%4%

2014 2015 2016 2017 2018 2019

PE IPO

$52B

$80

B

$117

B

$66B

$76B

$84B

$144

B$10

B

$12B

$9B

$11B

$8B

5x6x

6x

5x

8x

8x

18x

Q1 2018 Q3 2018 Q1 2019 Q3 2019

PE Fundraising

PE vs. VC Fundraising Ratio

VC Fundraising

svb.com/state-of-the-markets-report 20Notes: 1) Total of round sizes in which investor participated.Source: PitchBook and SVB analysis.

PE Tech Investment (% of all PE Buyout Deals)

Tech represents an increasing percentage of overall PE deals. This illustrates PE’s newfound understanding of opportunities and risk in growth tech companies. Specifically for PIPOs, PE is participating in some of the biggest deals this quarter.

Private Equity’s Appetite for Tech Increases

PIPOs with PE & Crossover Investors: Q3’19

19.5%

16.5%15.5%

13.4%

11.1%

11.7%

11.7%

11.9%

11.9%

11.9%

2019201620132010

Company Deal Size1 Investor(s)

$500M

$400M

$370M

$350M

$326M

$323M

$310M

$300M

$300M

$268M

21svb.com/state-of-the-markets-report

Public Markets An Update on IPOs

svb.com/state-of-the-markets-report 22Notes: 1) As of first day of trading or acquisition value through 9/30/2019.Source: PitchBook, CB Insights and SVB analysis.

In 2019, listings of US startups outpaced Europe and China, contrary to last year when international exits dominated. In the US, Unicorn exits this year and last represented ~$280B of realized value. The exited Unicorn value this year is 31% of the value that remains.

Role Reversal: Domestic IPOs Dominate 2019

$24.0B $23.3B$15.7B

$10.1B $9.2B $8.8B $8.1B $8.0B $7.8B $6.7B $5.2B $4.4B $4.3B $3.7B

Unicorn Value Realized YTD (Percentage) Relative to Total Remaining Value

Largest Venture-Backed Technology Exits1 by Region: 2019

US31%

EU1%China

7%

RoW1%

China Exit

Acquisition

US Exit

$75.7B

2014 2015 2016 2017 2018 2019

2014 IPO Cohort

2016 IPO Cohort

2019 IPO Cohort

% > LPV 79% 92% 75%Med. Mkt. Cap vs. LPV (>) 3.7x 3.2x 2.1xMed. Mkt. Cap vs. LPV (<) 0.5x 0.1x 0.6x% M&A 29% - -Med. Acq. Value vs. LPV 2.1x - -

svb.com/state-of-the-markets-report 23Notes: 1) LPV = Last Private Valuation. Source: S&P Capital IQ, PitchBook and SVB analysis.

While short term performance catches headlines, a public company’s true test comes over the long run. Looking back at the IPO cohorts from 2014 and 2016, the majority of companies are still above their LPV1.

A Look Back: Long-Term Performance Matters

Market Cap Relative to LPV: Top 5 US Tech IPOs by Post-Valuation from 2014 Cohort

$18.3B1

704.4x LPV2

$1.1B0.3x LPV

$3.6B2.4x LPV

$14.3B1.8x LPV

$0.3B0.4x LPV

1x

Consumer Enterprise

Median Multiple at IPO 9x 21x

Median Revenue Growth +58% +55%

Median Operating Margin -104% -32%

Median Margin Change -66% +3%

svb.com/state-of-the-markets-report 24Notes: 1) LPV = Last Private Valuation. 2) 2019 actual number as of 9/30/2019.Source: S&P Capital IQ, PitchBook and SVB analysis.

IPO 1 2 3 4 5 6

$7.0B1.7x LPV

$5.5B1.7x LPV

Months Trading Since IPO

$12.9B1.8x LPV

$3.5B1.5x LPV

$1.9B1.8x LPV

$13.1B3.9x LPV

$2.1B1.7x LPV

$51.8B0.7x LPV

$11.8B0.8x LPV

$14.3B1.8x LPV

$20.8B1

20.8x LPV2

1x

Struggling to prove their unit economics, Uber and Lyft have sunk below their LPV1. Meanwhile, other consumer and enterprise stocks have trended sideways, but mostly above their LPVs. Zoom has led the pack due to its superior fundamentals, product offering, and sizeable market opportunity.

The Street Validates the Valley

Market Cap Relative to LPV: $1B+ US Tech IPOs YTD2

$79M

$318

M $10

0M

$391

M

$160

M

$593

M

$40

4M

$1,0

78M

$826

M$82M

$72M

$91M $1

09M

$88M

$84M $1

43M

$148

M

$185

M $235

M2010 2013 2016 2019

svb.com/state-of-the-markets-report 25Notes: 1) 2019 actual number as of 9/30/2019.Source: PitchBook and SVB analysis.

Newly public consumer companies have grown to a scale not seen this cycle. Margins, however, have fallen below zero, leading to mixed performance in the public markets. In contrast, enterprise companies continue their path to break even.

Consumer IPOs Are Bigger, but Are They Better?

Median Revenue by IPO Year1 Cohort

Median EBIT Margin by IPO Year1 Cohort

Consumer Enterprise

19% 19%

5%8%

-4%

7%

-6%

1%

-25%

9%

5%

3%

-5%

-13%

-24%

-18%

-25%

-20%

-6%

2010 2013 2016 2019

Consumer Enterprise

N/A

svb.com/state-of-the-markets-report 26

Notes: 1) The “Rule of 40” is a guideline developed in 2015 for SaaS companies to manage growth (approximated by revenue) in sacrifice of profitability (approximated by operating margin). Growth rate + profitability should exceed 40%. 2) Revenue run rate = S-1 12 month or 6 month revenue and annualized (if required). 3) Most recent quarter relative to year prior.Source: Company SEC filings, S&P Capital IQ and SVB analysis.

YTD, the 2019 enterprise cohort has had the highest proportion of companies above the “Rule of 40” line of the last three years. The difference has been a margin improvement with sustained growth. This year, revenue growth has been less significant in determining the IPO revenue multiples.

“Rule of 40” Holds, but Is No Longer Just About Growth

“Rule of 40”1 Metrics 2016–2019 SaaS IPOs

IPO Revenue Run Rate Multiple2 vs. Revenue Growth

0%

20%

40%

60%

80%

100%

120%

140%

160%

-80% -60% -40% -20% 0% 20%

Reve

nue

Grow

thOperating Margin (Loss) 0x

5x

10x

15x

20x

25x

30x

35x

0% 50% 100% 150%

Revenue Growth at IPO

58.1x

2019R2 = 31%

2018R2 = 63%

svb.com/state-of-the-markets-report 27Source: PitchBook and SVB analysis.

In 2019, consumer companies that went public raised a large number of PIPOs. Enterprise companies typically raised fewer PIPOs relative to their consumer counterparts and performed better once public. PIPOs may signal to public markets that value creation has already occurred.

Private Markets Soak Up Unicorn Value

Consumer vs. Enterprise: PIPOs by IPO Cohort Year

PIPOs vs. Post-IPO Performance: 2019

0 0 4 2 277 3 5 18 120

5

10

15

20

25

30

2015 2016 2017 2018 2019

Consumer PIPOs

Enterprise PIPOs

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

120%

140%

0 5 10

Consumer

Enterprise

Direct Listing

Number of PIPOs Raised

28svb.com/state-of-the-markets-report

Liquidity Options Alternative Routes

$1.3B

$0.9B

$7.1B

$47.0B

$69.6B

$4.6B

$5.6B

$13.0B

$8.0B

$49.1B

$0.0B $20.0B $40.0B $60.0B

svb.com/state-of-the-markets-report 29

*$15B reserved for follow-on investments and coupon payments.Notes: Low-water mark calculation: $100B committed capital + $11B coupon payments + $8.5B management fees.Source: PitchBook and SVB analysis.

While SoftBank has seen positive performance from its investments in Slack and two healthcare companies, its larger holdings in Uber and WeWork have not fared as well. This is likely to hamper fundraising for the Vision Fund II and potentially affect the later stage funding environment.

SoftBank Vision Fund I: Under Pressure

SoftBank Vision Fund: Structure and Required Return

Performance So Far: Notable Investments

Own: 60%/40% Preferred/Common Return: 7% Coupon

+ % of Profits

Own: 100% Common

Return: % of Profits

$120B Minimum Required Return

$100B Fund Size

~$85B Invested*

$75B $25B

LP Return Structure SB Return Structure

9/30/2019 Valuation

Last Private Valuation and SBVF Last Investment

Private Valuation of SBVF First Investment

$48.0B

$21.0B

Est.

svb.com/state-of-the-markets-report 30Source: PitchBook, S&P Capital IQ, and SVB analysis.

Direct listings provide the liquidity of a traditional IPO without the cost of hiring an investment bank or the additional dilution from creating new shares. Airbnb may be the next direct listing and the biggest yet, but it is unclear whether it will go the way of Slack or Spotify.

The Direct Listers: Airbnb May Test the Model

Valuation Trajectory Before and After IPO

$0B

$10B

$20B

$30B

$40B

IPO

- 300

Day

s

IPO

- 250

Day

s

IPO

- 200

Day

s

IPO

- 150

Day

s

IPO

- 100

Day

s

IPO

- 50

Days

IPO

IPO

+ 50

Day

s

IPO

+ 10

0 Da

ys

IPO 4/3/2018

IPO 6/20/2019

Secondary sale of equity by earlier investors at a $20B valuation

LPV from 2017 VC round

Series H: $427M raised at a $7.13B post valuation

svb.com/state-of-the-markets-report 31Notes: 1) NPM = Nasdaq Private Market, 2) 2019 actual number as of 9/30/2019.Source: Nasdaq and SVB analysis.

For investors and employees to liquidate their holdings, they would typically have to wait until their company was either acquired or went public. Perhaps this is becoming a thing of the past, as secondary exchanges gain traction, solving the liquidity dilemma.

Secondary Markets Are Becoming Established

Private Company Secondary NPM1 Programs by Year2

40

32

51

7975

2015 2016 2017 2018 2019

101

NPM Programs

Projected

Raised a PIPO in last round of funding

50 percentAverage company age

9 yearsMedian transaction value in 2018

$17 million

svb.com/state-of-the-markets-report 32Notes: 1) Special Purpose Acquisition Companies. 2) 2019 actual number as of 9/30/2019.Source: SPAC Research database, S&P Capital IQ, and SVB analysis.

SPACs1 have reentered the fray as an interesting exit for tech companies. These vehicles go public with the intention to combine with a private company. Along with direct listings, SPACs represent an alternative route to the public markets instead of the traditional IPO.

SPACs Provide Alternative Path to Public Markets

SPAC IPOs by Year2Tech Acquisitions Involving a SPAC

$1.4

B

$1.8

B

$3.9

B

$3.5

B

$10.

0B

$10.

8B

$10.

5B

1012

20

13

34

4644

2013 2014 2015 2016 2017 2018 2019

Amount Raised

Number of IPOs

Social Capital Hedosophia (NYSE: IPOA)IPO 9/14/2017

Merger with Virgin Galactic7/9/2019

Churchill Capital Corp (NYSE: CCC)IPO 9/6/2018

Merger with Clarivate Analytics5/13/2019

33svb.com/state-of-the-markets-report

Appendix

svb.com/state-of-the-markets-report 34

About the Authors

Bob BleeSr. Associate, Researchapardo@svb.com

Vice President, Researchncandy@svb.com

Head of Corporate Financebblee@svb.com

Nick Candy, CFA Andrew Pardo

Bob Blee heads Silicon Valley Bank’s Corporate Finance Group, which leads SVB’s relationships with public and late-stage private companies in the Innovation sector throughout North America, providing a full suite of lending and banking products, and guidance as a trusted partner, helping our clients succeed and quickly scale.

Previously, Bob held a variety of roles in SVB’s California and Midwest regions, including heading seed, early and mid-stage Infrastructure, Hardware and Consumer Internet and Fintech banking in the Bay Area and Southern California, and was responsible for SVB’s Mezzanine Lending and Loan Syndications practices.

Bob sits on the nonprofit board of the Network for Teaching Entrepreneurship (NFTE) and the Silicon Valley Advisory Council of the Commonwealth Club. He is also active with his alma mater, the University of Illinois.

Andrew Pardo is a Senior Research Associate based in San Francisco who is responsible for the capital market research and data-driven analysis of the innovation economies that SVB serves globally. In this role, he supports research efforts exploring investment, fundraising and exit dynamics in the global venture ecosystem.

Prior to this role, Andrew was a buy-side equity research analyst for a $100B+ asset manager based in the Bay Area. His area of coverage spanned the domestic and international Financials sector. Andrew earned a bachelor of science in accounting from Loyola Marymount University.

Nick Candy, a Vice President of Research based in San Francisco, is responsible for the capital market research and data-driven analysis of the innovation economies that SVB serves globally. In this role, he has led global research efforts exploring investment, fundraising and exit dynamics in the venture ecosystem.

Prior to his research role, Nick managed strategic advisory and valuation engagements for venture-backed technology companies as part of SVB Analytics.

Nick earned a master of business administration from Chapman University and a bachelor of science in design from Bournemouth University. In addition, he holds the Chartered Financial Analyst (CFA) designation.

svb.com/state-of-the-markets-report 35

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See complete disclaimers on previous page.© 2019 SVB Financial Group. All rights reserved. SVB, SVB FINANCIAL GROUP, SILICON VALLEY BANK, MAKE NEXT HAPPEN NOW and the chevron device are trademarks of SVB Financial Group, used under license. Silicon Valley Bank is a member of the FDIC and the Federal Reserve System. Silicon Valley Bank is the California bank subsidiary of SVB Financial Group (Nasdaq: SIVB).

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